A senior technical executive has predicted the further change to the downsizer contribution rules may not be as attractive for consumers as would appear on the surface, despite the superannuation measure having been very popular to date.
Before winning the federal election in May, Labor committed to reducing the qualifying age for downsizer contributions from 60 to 55 to afford more Australians the opportunity to allocate money to their super funds upon the sale of a principal place of residence.
“I think there’s got to be a question, certainly when [the qualifying age] was reduced down to 60 and even more so when it does get reduced down to 55, as to whether it is appropriate for your clients at those younger ages to use the downsizer contributions,” BT head of financial literacy and advocacy Bryan Ashenden said.
“[In the case of a person who is 55], if they are then going to use some of [the proceeds of the property sale] to purchase another principal place of residence … then assuming they stay there for at least 10 years at age 65, they would have another property that could qualify if they haven’t yet made a downsizer contribution.”
To this end, he suggested making a downsizer contribution could be more prudent at a time when an individual can no longer make a non-concessional contribution, for example, if they are over the age of 75.
“Please don’t take this as saying you shouldn’t use a downsizer contribution until later on. What I think is important is to just think about the different options and is it something that we should potentially be waiting for,” he noted.
Further, he pointed out uncertainty remained as to when this change to the legislation will take effect.
“We wouldn’t see legislation passed in time for 1 July . Now the measure could always be back dated to 1 July 2022, but of course that would have an impact on potential strategies that you might be recommending to clients who are in that 55 to 60 age bracket,” he said.